Thursday, September 8, 2016

After Reading This, You’ll Want to Move to Puerto Rico Tomorrow

If you’ve been a reader of this letter for any length of time, you know I hate taxes.

I unequivocally believe that I have a moral obligation to reduce my taxes to the lowest level possible.

It’s not about Maseratis and private yachts (I drive a Volvo and get seasick easily).

I’ve slashed my taxes because I know that tax dollars pay for some of the most vile, immoral things imaginable.

Drone strikes on children’s hospitals. Illegal wars that benefit a few defense contractors and oil companies. A gigantic police state that makes people less free every day.

All of this is paid for with your taxes.

In addition to the morality issue is the extraordinary waste that comes with government spending.

Just think about all the money they squander, from the $2+ billion for the Obamacare website, down to the $387,000 that the NIH spent giving Swedish massage to bunny rabbits.

Sure, there are plenty of programs that have noble intentions.

But they’re so bogged down with bureaucracy that they consistently fail to get the job done-- just consider how many sick and wounded US veterans have died waiting to see a physician under their government health plan.

The icing on the cake with taxation is a complete lack of transparency.

The US Army just got caught red handed, for example, cooking its books and making willful accounting misstatements totaling trillions of dollars.

People have gone to jail for far less egregious offenses.

I founded a large company that raised tens of millions of dollars of capital from investors.

Management submits detailed budgets and cash balances to the Board of Directors and provides all shareholders with clean, audited financial statements and regular updates.

This is the only proper thing to do.

When someone else hands over his/her capital to you, it comes with a supreme fiduciary obligation for the funds to be invested with great care and transparency.

This solemn vow also applies to taxation: paying taxes demands transparency, results, and accountability. But governments fail on all fronts.

Now, we’re told growing up that when we disagree with our government, we’re supposed to wait patiently for several years and then voice our dissatisfaction in a voting booth by choosing between two lackluster candidates.

But in reality this changes nothing.

Voting is a pointless and rigged exercise that leads many to false hope, others to angry protest, and everyone else to despair.

My approach has long been to restrict the resources that I contribute to a government that I disagree with.

Money is far more powerful than voting.

And by taking completely legal steps to reduce the taxes that I owe, I no longer make direct financial contributions to what I morally oppose.

Plus staying in control of my income has put me in a position to use the tax savings in more productive ways.

Rather than funding illegal wars, my tax savings have gone to support a distressed village in Nepal, fund a wounded veteran’s $70,000+ experimental prosthetic, and put an orphaned girl through university.

No matter what you do or where you live, there are plenty of ways you can make a huge dent in what you owe.

Maximizing contributions to tax-advantaged retirement accounts is an easy example.

If you’re a US taxpayer, you might also be able to restructure your retirement accounts into a self-directed SEP IRA or solo 401(k), allowing you to take over $50,000 per year off the table, with the added benefit of giving you more influence over how your funds are invested.

Many small business owners can also generate hundreds of thousands of dollars in tax savings by setting up captive insurance companies under Internal Revenue Code section 831.

For anyone with a more flexible lifestyle, moving overseas can also bring significant tax benefit.

I’ve discussed the Foreign Earned Income Exclusion before for US taxpayers, which provides an exclusion for over $100,000 of ‘earned’ income (i.e. NOT investment income), plus further deductions for overseas housing.

US citizens can move to Puerto Rico in an instant. For you, coming to Puerto Rico is like moving from California to Texas. There are no visa or immigration requirements.

And once you get here, there are a myriad of special tax incentive laws aimed specifically at investors and entrepreneurs that can dramatically reduce or eliminate taxes on business and investment income.

5 comments:

8O God god! Have you ever lived in Puerto Rico for any length of time?If you can afford to setup your residency address there and not have to send much time in the island, that might work.This last summer I visited family in PR and it felt like I was in a foreign country. I was born and raised in PR. I told my brother that if I moved back, I would killing someone or I would end up being killed.There is more to life than just ecomomic formulas.If you are wealthy enough, you can live in certain areas but yuo will have to go out st some point.Move to Puerto Rico ... no way Simo'n

I am neither. All my family lived in Puerto Rico, except for a brother. Should I listvthe crimes perpetuated to relatives and friends through the years?PR is a nut case, the middle class is losing ground and the the upper class is gaining.My own freaking cousin in Ponce told me, talking face to face, that the chaos, as long as it did not get too extreme, was helpful. Because it was causing enough p'rricans to leave.My dad (RIP) was a civil engineer contractor. The goverment would not pay for contracts completed. He finally ended up declaring bankrupcy. That was not too many years ago.I am aware. You are on drugs.

Let me add that I moved back to Puerto Rico, after college, in 1984. Lived there 1 year and I quit my job, cold turkey, and went to Texas to seek a future, for there was none that I could discerned in PR.

I have very mixed feelings about the maximized IRA contributions. Yes, I get a current tax savings, but when I start drawing it out, tax rates are likely to be so much higher that it negates any current tax savings. Thoughts?